Ingo Uytdehaage, Adyen | All-In Summit 2024

The Besties welcome Adyen Co-CEO Ingo Uytdehaage (0s)

• Adyen is a rapidly growing company in the financial services sector, known for transforming the typically unappealing payments industry into a more attractive field. (0s)
• The company has significantly invested in new technology, leading to improved quality and better conversion rates for customers by rebuilding the infrastructure traditionally managed by banks. (19s)
• Ingo Uytdehaage has been with Adyen since 2011, initially serving as CFO and becoming co-CEO in May 2023. (44s)
• Adyen, founded in 2006 and based in the Netherlands, is one of the largest payment processors globally, processing nearly a trillion euros in payment volume in 2023. (55s)
• The company reported a net revenue of 1.6 billion euros and an EBITDA of 743 million euros, with a 46% EBITDA margin. (1m7s)
• Adyen experienced a 24% year-on-year revenue growth in the first half of 2024 and has recently expanded into the Indian market. (1m31s)
• As of the latest check, Adyen's market capitalization is approximately 45 billion US dollars, making it one of the most successful tech companies globally. (1m38s)

Ingo lays out the case for Adyen over Stripe (1m56s)

• Adyen and Stripe are the only two companies globally investing significantly in financial technology, and both have the potential to transform the industry, which is currently dominated by traditional players like banks. (2m27s)
• Adyen competes with Stripe in certain areas, but most of its business comes from traditional incumbents, where it offers lower costs and improved technology compared to banks. (3m28s)
• Adyen has built a single global platform that reduces payment costs and increases authorization rates, leveraging extensive data to provide these benefits. (3m53s)
• Adyen aims to replace traditional payment infrastructure and has its own access to the Federal Reserve in the U.S., reducing reliance on commercial banks. (4m37s)
• Adyen is expanding from payments to broader financial technology, aiming to be a partner for companies offering banking as a service. (5m5s)
• Adyen maintains profitability by delivering value and premium pricing, avoiding a strategy focused solely on low pricing to preserve value and ensure meaningful conversations about the value provided. (5m44s)
• The company prioritizes revenue growth and is open to investing in opportunities that align with its long-term view. (6m31s)

Building and scaling a tech company in Europe (6m37s)

• Building a company in the Netherlands necessitates an international approach from the start due to the country's small population, which limits the potential for a successful business based solely on the local market. (6m37s)
• Initially, the company focused on hiring in Amsterdam, but about ten years ago, it expanded to the US, where it now has over 800 employees, making it the largest market outside of Europe and accounting for one-third of total revenues. (7m13s)
• The expansion to the US has changed the company's perspective on serving merchants, emphasizing the importance of having product and engineering teams close to customers to solve real problems effectively. (7m39s)
• There are talented individuals in both the US and Europe, but the US technology market is more competitive. In Europe, the company benefits from higher brand awareness, which is currently being improved in the US. (8m17s)
• The company works with major global brands such as Google, Meta, Microsoft, H&M, Nike, and Gap, which helps in gaining entry into markets like the US. (8m50s)
• Attracting a shareholder base as a European company presents challenges, particularly with American investors who tend to invest in American companies. This affects valuation, as seen in the valuation gap between the company and Stripe. (9m13s)
• In 2014, the company sought a global investor base, bringing on board investors like Iconic, General Atlantic, and TASC from Singapore, who have been supportive up to the company's listing in 2018. (9m59s)
• Listing in Europe was considered as easy as listing in the US, and from a valuation perspective, it even provided a premium due to a strong US investor base of around 60-65% at the time of listing (10m16s).
• The combination of being a scarce tech stock in Europe and having a large US investor base worked well, resulting in a premium for listing in Europe (10m46s).
• There is a difference in valuation between public and private markets, which may be due to the fact that public markets focus on growth rates and profitability, while private markets focus on promise versus performance (11m0s).
• The difference in valuation between public and private markets is expected to rationalize over time as both markets compare the same numbers (11m3s).
• If there was no liquidity in Europe, listing in the US would be considered, but since there is sufficient liquidity in Europe, listing in the US is not necessary (11m18s).
• The valuations of public and private markets will eventually merge as the focus shifts from promise to performance, with public markets prioritizing performance and private markets prioritizing promise (11m32s).
• Private market valuations, particularly EBIT margins, are extremely high, which is not sustainable in the long term (11m39s).

Thoughts on stablecoins, financial deplatforming, expanding into India (11m43s)

• Ten years ago, conferences would focus on the impact of crypto and blockchain, predicting the destruction of businesses and the elimination of banks and nation-states, but none of that has happened, except for the emergence of stable coins, which are promising and interesting (11m44s).
• Stable coins, such as Circle and Tether, are being used for transactions, especially internationally, and have the potential to be used for business transactions in a major way (12m11s).
• In well-developed markets, there is no high need for stable coins for domestic payment flows, but they may have a future in cross-border transactions, which currently rely on old systems like Swift (12m51s).
• Adyen would consider working with stable coins, potentially partnering with existing providers, rather than launching their own, as part of their model of bringing financial technology to customers and working with partners (13m21s).
• Financial censorship and deplatforming are significant concerns, as seen in the case of Canadian truckers who were deplatformed from financial services, and companies must balance this issue while processing money for millions of people (13m52s).
• To address this, Adyen works with platforms that have knowledge about their customers, combining this knowledge with financial technology to provide a strong proposition and prevent money laundering and terrorism financing (14m19s).
• Adyen has invested heavily in AML machine learning to build a scalable solution, which they offer to their companies, and this approach is more effective than traditional players like banks (15m9s).
• Being a European company may present complications, but this is not explicitly stated as a significant issue (15m18s).
• The company has transitioned from being a European company to a global entity, aiming to comply with local regulations worldwide and compete on equal footing with competitors in the US. (15m29s)
• The company has been expanding its operations in India since 2018-2019, facing challenges such as data localization rules that require storing Indian data within the country. (16m6s)
• To address these challenges, the company has restructured its data infrastructure, established local data centers in India, and obtained necessary licenses, positioning itself as a unique provider for international companies operating domestically or cross-border in India. (16m29s)
• The company's strategy focuses on following its customers into new markets, viewing its investment in India as a long-term commitment similar to China's growth trajectory in the mid-2000s, with clear regulatory guidelines from the outset. (17m1s)
• The company's unique position is attributed to its combination of technology, regulatory knowledge, and appropriate banking licenses, which it leverages to maintain a competitive edge. (17m35s)

AI in fintech, open-source solutions (17m50s)

• AI is being utilized to optimize transaction routing, particularly in the US, where it helps make cost-effective decisions for merchants, resulting in over 20% cost reduction. This involves intelligently selecting cheaper processing routes while balancing authorization rates, and it is currently in production with partners like eBay and Microsoft. (17m50s)
• Internally, open-source solutions are being used to enhance support functions, leveraging extensive data to improve operations. The company has a strong focus on automation, which contributes to its efficiency and low employee-to-volume ratio. AI is expected to further aid in scaling operations. (18m53s)
• The company adopts a strategy of being a "smart follower," closely monitoring large investments in AI by other companies to identify beneficial applications. The emphasis is on practical execution and proving capabilities to enterprise merchants, rather than merely discussing potential innovations. (19m56s)

Offering services in authoritarian countries, data in economic forecasting, working as a Co-CEO (20m31s)

• The issue of operating in authoritarian countries, such as China, is polarizing due to human rights concerns and the potential need to comply with local regulations. Some companies choose not to operate in these regions, while others, like Adyen, have teams in China to facilitate business for Chinese merchants wanting to expand to the US. Adyen takes a pragmatic approach, assessing each market individually based on demand and stability. (20m33s)
• There is a growing movement to create alternatives to the SWIFT financial messaging system, driven by concerns over Western influence and the ability to impose sanctions. Alternatives, including stablecoins, are being considered, and technological solutions are being explored to reduce dependence on SWIFT. (22m7s)
• Adyen is interested in using its data to provide a more dynamic view of economic health, similar to how unemployment and GDP figures are used in the US and Europe. However, the challenge lies in distinguishing growth from market share gains. With over a billion unique shoppers on its platform, Adyen sees potential in leveraging this data, but it may take years to achieve a stable enough position to do so effectively. (22m50s)
• PayPal is considered an important partner, and there is a collaborative relationship involving a new Express checkout feature developed together. (24m9s)
• The company operates with a unique co-CEO structure, where Ingo Uytdehaage and Peter, the founder, share responsibilities. This setup is seen as effective when it works well. (24m33s)
• Peter, the founder, focuses on the company's culture and frequently meets with merchants, highlighting the importance of maintaining strong relationships with them. (24m52s)
• The partnership between Ingo Uytdehaage and Peter has been ongoing for 13 to 14 years, characterized by a natural working relationship that leverages their respective strengths and acknowledges their weaknesses. (25m14s)